New TDS rates from October 1: What changes for you
The Finance Bill has given a thumbs-up to several important proposals from the Union Budget 2024, including revised Tax Deducted at Source (TDS) rates. These fresh rates will kick in from October 1, per the Income Tax Department's website. The whole idea behind TDS is to collect tax directly from the source of income. So, if you're making a payment of a certain type, you're required to deduct tax at the source and deposit it into the Central Government's account.
Significant reductions in TDS rates
The newly revised TDS rates feature a notable cut from 5% to just 2% for payments made under sections 19DA, 194H, 194-IB, and 194M. This covers payments linked to life insurance policies (Section 194DA), commission from lottery ticket sales (Section 194G), rent paid by certain individuals or Hindu Undivided Families (HUFs) (Section 194-IB), and certain sums paid by specific individuals or HUFs (Section 194M). Additionally, the TDS rate for e-commerce operators, under section 194-O, has dropped from 1% to 0.1%
New tax rules for floating rate bonds and share buybacks
Starting October 1, TDS will be deducted at a 10% rate from specific central and state government bonds, including floating rate bonds. This rule applies once the revenue earned throughout the year crosses ₹10,000. Additionally, share buybacks will now be subject to shareholder-level taxes similar to dividends from this date onward. This change is expected to increase the tax burden for investors as it will consider the shareholder's acquisition costs of these shares when calculating any capital gains or losses.
Increase in securities transaction tax and TDS on property sales
The 2024 budget has also increased the securities transaction tax (STT) on Futures & Options (F&O) of securities to 0.02% and 0.1% respectively, effective from October 1. Income from share buybacks will now be taxed at the beneficiary level. Additionally, payments for the sale of immovable property exceeding ₹50 lakh must include a 1% TDS as per Section 194-IA. In transactions involving multiple buyers or sellers, this rule applies collectively starting October 1, further impacting real estate transactions.
